DoorDash CEO Tony Xu on why profitability is his top priority
DoorDash CEO Tony Xu visited Fortune’s offices this week, and he had a lot to say about the basics of good business.
Xu is the chief of a tech juggernaut valued at approximately $13 billion that’s still fighting to win in an ultra-competitive market. His rivals—UberEats, Postmates, and Grubhub—are looking to grab a slice of the food-delivery pie, but DoorDash is reportedly in the lead when it comes to growth. Now Xu says his company is big on profit, too.
“We’ve had to dial in the unit economics since day one, and make sure the business had a path to profitability long, long, long before all the headlines started popularizing this theme,” he told Fortune. “I don’t understand why everyone’s talking about [profits] now, because candidly, for us, we had no choice but to focus on a path to profitability from the beginning.”
I was skeptical of this comment because many founders—including Xu—have openly spoken about prioritizing growth over profitability. Last February, Xu told CNBC, “Right now we’re choosing to invest in growth and delay profitability for the entire company. But we have the means in which to do that and we know how to get there. But right now we want to accelerate to the number-one position sooner.”
The company had then just raised $400 million in venture funding from Temasek Holdings and Dragoneer Investment Group. The funding came a year after DoorDash raised a monster round of $535 million from backers including SoftBank, Sequoia Capital, GIC and Wellcome Trust.
This week, though, Xu heavily emphasized the importance of capital efficiency and turning a profit in spite of its war chest of capital. When I made a comment that DoorDash is not yet profitable, Xu said, “No, but we’re working our way there.”
“What I know is, delivery is not profitable,” Chris Webb, CEO of ChowNow, recently told Fortune. “It’s been the same way since these companies started.”
Xu hopes to be the first in his industry to change that trend. “As a founder, you can’t be confused. You have to know how to grow efficiently,” emphasizing that DoorDash is hyper-focused on its unit economics.
Profitability is a hot topic these days. I recently wrote about scooter startup Lime’s plans to lay off 14% of its staff—approximately 100 people—as it pulled out of a dozen markets in the U.S. and abroad. At the time, co-founder and CEO Brad Bao said, “Part of realizing our vision to transform urban mobility is achieving financial independence; that is why we have shifted our primary focus to profitability.” So has Bird. So has WeWork. So has Fair.
In the past, venture capital firms that fund unicorns (or decacorns) like DoorDash have had a much higher tolerance for forgoing profitability for growth, but as more and more of these unicorns trot–and stumble—to the public markets, the sentiment has begun to change.
Xu declined to comment, but there’s been talk that DoorDash will go public in 2020. We might have much more insight into its business fundamentals sooner rather than later.
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FIRMS + FUNDS
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